It should come as no surprise that in the provincial budget (“Jobs For Today and Tomorrow“) announced on February 25, 2016, the Ontario government has proposed a reduction to the level of support provided via Research and Development Tax Credits. These changes are effective for eligible R&D expenditures incurred in taxation years that end on or after June 1, 2016.
Specifically, this includes a reduction to “top up” programs that are combined with the Scientific Research and Experimental Development (SR&ED) program:
- Ontario Research and Development Tax Credit (ORDTC) will be reduced from 4.5 % to 3.5%
- Ontario Innovation Tax Credit (OITC) will be reduced from 10% to 8%.
While this may seem insignificant to organizations with smaller R&D budgets, organizations who are currently investing heavily in R&D may feel the pinch.
Explanation of Changes to R&D Funding in Ontario
The text below (taken directly from the 2016 Ontario budget) summarizes the changes made to provincial R&D tax credits, including the ORDTC, the OITC, and the Ontario Business Research Institute Tax Credit (OBRITC). The text also explains that the Ontario government is redistributing the funds diverted from the indirect funding approach (i.e. tax credits) via direct funding programs (i.e. so-called “targeted investments”).
Comparison With Previous Ontario R&D Funding
It is helpful to see how R&D tax credit rates have changed over the years in Ontario. The table below offers a side-by-side comparison of these changes.
|Budget Year||Ontario Innovation Tax Credit (OITC)||Ontario Business-Research Institute Tax Credit (OBRITC)||Ontario Research and Development Tax Credit (ORDTC)|
The sources for these tax credit rates can be found in the following SREDucation articles: Roundup: Provincial R&D Credits, 2013 Ontario Budget: Rumblings Over Tax Credits, and Provincial Tax Credits: Making the Most of SR&ED.
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